The SAARC Development Fund (SDF) has come forward with a line of credit (LoC) for infrastructure projects in Bangladesh, officials said.
It will finance projects in energy, power, transportation, telecommunications, environment, tourism, and other areas.
SDF will also finance Micro, Small and Medium Enterprises (MSME) sector in the SAARC member states. Under the move, LoC is proposed to domestic banks and financial institutions for their on-lending to MSME sector.
"SDF will be able to lend maximum US$ 10 million per project at present, which could be enhanced in due course. We are actively soliciting projects from various agencies in Bangladesh," SDF chief executive officer Dr Sunil Motiwal wrote in a recent letter to the Economic Relations Division (ERD). Â Â
SDF will offer loans at concessional rate, depending on merits of the projects, he wrote. Â Â
A senior official at the Ministry of Finance told the FE that the loan offer received from SDF seems lucrative, as it will charge concessional rate of interest.
He said the Bangladesh Bank (BB) has also given positive response about the loan offer, and the government is actively considering taking loan from the SDF.
According to funding criteria, SDF can fund projects or programmes involving one or more than one SAARC (South Asian Association for Regional Cooperation) member states with the direct benefit going to more than one member state.
SDF is aimed at contributing to regional cooperation and integration through project collaboration. Projects, which are in some way related to regional connectivity and integration of at least two SAARC member states, will be considered for funding.
The fund will also form relationships with multilateral and domestic institutions in the SAARC member states for taking up joint initiatives and co-funding of projects.
Besides, under its 'economic window' SDF will extend funding to non-infrastructural projects, related to trade and industrial development, agriculture, service sector, and science and technology.
Officials said the Bank and Financial Institutions Division sought opinion of BB on SDF LoC, which suggested that the rate of interest should not exceed 0.5 per cent, and the repayment period should not be less than 30 years with 10 years grace period.
The central bank also informed that the country's SME lending is increasing every year with loans and grants from the Japan International Cooperation Agency (JICA), the Asian Development Bank, and the World Bank's International Development Association loan. In 2015 some Tk 1.15 trillion was disbursed as SME loan, up from Tk 1.0 trillion in 2014, and Tk 83.23 billion in 2013.Â
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